Navigating Divorce and Retirement: Insights from 50 Years in Family Law with Leon Berg

Thank you. It's a pleasure to be here.

So this is exciting. First of all, it's always nice to have someone in studio because it creates a totally different dynamic for the show. Why don't you share first with our audience a little bit about why you decided to practice law and then specifically why you decided to practice divorce. That's a sometimes confrontational and difficult subject.

Well, I decided to practice law because I went to law school and I went to law school because I was terrible in math and science. But you know, I was my parents gave me a choice of either being a doctor or a lawyer. So I chose lawyer. Why I chose divorce law. You know, when I started practicing, I opened up a practice next to an Army Navy recruiting office in Laurel, Maryland. And frankly, I did whatever walked in the office. I, you know, know became an instant expert on. The fact of the matter is that so many cases that come in are family law related.

As a matter of fact, over 50% of the case civil cases filed in the cir court for Baltimore county for years now have been family Law related cases. So that's where the, you know, business is, so to speak. I guess. I, after doing many other things for about the first 20 years of practice, I realized that I had sort of a comfort level in dealing in the area of family law. I think that it takes an attorney who first of all can listen to people and let them sort of vent through one of the most difficult experiences in their lives and, and hear it without either putting them on defensive or feeling that it's your fault that their lives are miserable. Because if that's the case, then you kind of become very defensive and that's not an effective way to deal with a client. So I felt like I had a knack for it. And frankly, it's just an area of law that also encompasses so many other things.

People don't walk in with the word divorce on their forehead. They have property, they have financial interests, they have all kind. There are businesses involved and business valuations often involved. So you have to have some sense of knowledge in many different areas. So that's why divorce law kind of suited me.

So when we talk about graduating into retirement, there are a couple of icebergs out there that we talk about things that can derail financial freedom, financial independence. One of them is long term care. So we talk to sometimes elder lawyers and folks who specialize in that kind of work. We think about long term care and what if there's a long term illness in the family and what that can do to money. But I don't know of any way to cut money in half faster than to split a household and to raise the bills by suddenly having two households and two of everything. And divorce is expensive. And even in the most amicable cases, it's hard. It's hard emotionally, it's hard financially.

So you mentioned that you were. That you liked the ability to not only listen, but the ability to counsel folks through something difficult. How much of your time do you think is spent in a confrontation or in a negotiation as opposed to sort of a. What's the word I'm looking for? I'm looking for. Yeah, negotiation. How much of it. How much of it's confrontational and how much of it is just relational?

Well, I'm not sure. Are you talking about in terms of dealing with the other side?

Absolutely, absolutely.

Okay, well, because I wanted to comment that half of the job is creating realistic expectations with your own client and then hopefully the other attorney is doing the same thing. Cases involving difficult clients are not as problematic as cases involving a difficult attorney. On the other Side, the attorney could be difficult for any number of reasons. That attorney may not be well informed in the law and therefore has his or her own unrealistic expectations or positions. Or they can be difficult because of very personal reasons. Maybe you know, they're still fighting their, the last divorce that they went through. Not every attorney has the, has the focus on solving problems as opposed to creating problems. And I think that in this area of practice it requires our best efforts in terms of solving problems.

So the first step is to get your own clients expectations to be one within reason. And then the other aspect of course is the negotiation process. And that really look, no one can pred. Can predict what a judge is going to do. But when you're negotiating a settlement, you have to view it in terms of what happens if you don't settle. Well, then you're going to go to court. So if your settlement demands are unreasonable, then why would the other side accept it if the other side knows they can go to court and get a much better result? So we have to construct our negotiations within the parameters of what we believe are likely outcomes if it goes to court. Now there's nothing magical about that because there are 20 some different judges.

On any given day you could have one of six judges in Baltimore county in the family law rotation and you only know who that judge is the afternoon before the trial because they don't want you to shop. So which judge you get is going to be a total surprise. And therefore you have to allow for a certain range of possible outcomes. And that's the parameters for the negotiation as well. And of course you can't negotiate effectively if you're not ready to say, sorry, that's not acceptable. See it in court tomorrow. Call your first witness. So that means that getting to the point where you're negotiating means you've already done the homework, you've already done the adequate discovery.

The cards are on the table.

So how much transparency do you find most of the time is provided? Do you find there's a, an attempt at least sometimes for one spouse or the other to hide money or to, to not be forthright about financials? Do you find that, that, I mean that would seem to start a confrontation right away as soon as there's some kind of financial chicanery. But, but are there things that, that are tells? Are there, are there? You know, poker players always know the tell. They always know how. How do you know when somebody's not being forthright? How do you get forensic with that without, without, you know, sort of jumping into the bank statements. Do you have to do all of that?

Well, the simple answer is you do have to do all that. You know, basic discovery, you know, basic due diligence in representing someone in divorce will involve initially, either on a formal or an informal level, asking for bank records, asking for, you know, tax information. You know, there's some material that you can get online, of course. I mean, real estate information primarily. But obviously, if people live at a level that doesn't match up to their incomes, that's one reason to look. If people claim that they don't have. I mean, a simple example, someone says, well, I don't have anything more than these two accounts, and you look at their tax return, and they're getting interest and dividends from umpteen sources.

Yeah.

You know, there's a disconnect there.

Sure, sure.

So. So obviously, when you're practicing at a level, a more sophisticated level, the means of hiding income will have to be more sophisticated. And I think perhaps one of the big challenges now is the cryptocurrency. Of course. And I'm glad that I'm out of. Out of that particular arena before I have to figure out how to find cryptocurrency, which by its very nature is intended to be unseen.

Yeah, yeah, that's a good point. I hadn't thought of.

Yeah. Oh, God, I'm glad I thought of something.

Well, listen, I knew I'd learned something today. I didn't expect it to be this morning.

Yeah.

But I. But I knew I would learn something today. No, this is. This is the kind of thing that when I think about family law, first and foremost, I don't always immediately come to divorce. I think about special needs planning. I think about child care type stuff. I think about. I also think about some divorce prevention.

You know, the prenuptials. Obviously, it's not divorce prevention, but it's pre negotiating, at least to some level. Do you see prenuptial agreements as being particularly useful, or do you see them as being easy to blow up? Like, what is that? Tell me more.

Well, I've often told people that prenups or ante nuptial agreements, they go by either term, are like the black sheep of domestic practice. The reason being that despite the fact that statistically, perhaps around half of all marriages end up in divorce, when you're dealing with your client and your client either wants a prenup or your client's fiance has asked your client to sign a prenup up, the attitude is, oh, look, whatever he or she wants, it's not a problem. We're not going to get divorced. So you have to get someone who's about to get married. Thinking in terms of, here's what's going to happen if you get divorced in seven years, in 10 years, in 15 years. I have a good anecdote if you're in.

Please, now bring it. Let's, let's hear it.

Okay, so someone comes to me and says that their fiance, her fiance wants her to sign a prenup. And the fiance was fairly well to do, but had been through a divorce already and was hypervigilant, if, if you'll allow that word. The agreement had lots of faults, and there's no reason to go into all the specific faults. But my client said, I don't care. It's not going to be a problem. I'm signing it. I said, well, do me one favor. Allow me to send you a letter, which was essentially a CYA letter, so that I can delineate every concern that I have about this so that you'll have a chance to read it and absorb it.

She says, okay, I'll do that. I put in italic, bold in the first paragraph, do not share this with your fiance, knowing that that's exactly what she would do. And I wrote an extensive letter about how problematic this agreement would be to her if and when a divorce came about. And at the very end, I put, if he really loved you, he wouldn't want you to sign this agreement.

Oh, you did?

The attorney actually did that? Yes, yes. And knowing that it would, he would see.

Okay. All right.

And the attorney, who I respect, he's an excellent attorney, calls me up about a week later, and he says, I don't know what happened, but my client just told me to tear up the, the, the, the proposed agreement. Fast forward maybe two years later, I'm leaving a restaurant with my wife, and she's getting out of the car with her now husband. They're carrying a little baby in one of those carriers, okay? She sees me, she hands her husband the carrier. She comes running up to me, gives me a big hug, says, I want you to meet my husband. She brings me over. I. She introduces me to him, and he looks at me, he goes, you're the one who wrote that letter, aren't you?

It must have been pretty good.

Oh, yeah, it worked.

Must have been pretty. It sounds like poetry.

Yeah.

Well, yes. And you knew she would share it. And she did.

And she did.

So how, how do you counsel people when a prenuptial agreement or anti Nuptial agreement is necessary. I mean, there's certainly some business examples, there's remarriages where there's multiple kids from other matter. But, but one of the. What are the signs where that becomes something really important versus maybe it's not necessary.

Well, that's a good point because there are oftentimes when people come in saying, I think we need a prenup. And I go through the assets of my clients assets, obviously I can't deal with both sides that are technically adverse. I go through my clients assets and I say, well, all right, you have these bank accounts, you have this investment portfolio that your parents started for you, you know, 10 years ago. All you need, if this is what you're trying to protect, all you need to do is not, is to isolate those accounts and not commingle anything that you earn post marriage with those funds or those accounts and they will be protected. So you really don't need a prenup for that purpose.

Okay.

Difficult prenup cases are often ones where one of the parties is in a family business. And what you're worried about is the fact that, and again, this, this kind of assumes a certain kind of ingenuousness on the part of the fiance that the family is going to be an ability and is going to have the ability to control the income that the fiance has. So if they want to say, all right, well I'll keep your income at level X and what you're really worth, the delta, we're going to put in a savings account that's not in your name and that'll just be retained by the business.

I see.

So in a sense you have assets that are earned during the marriage but are kept out of the marital community, if you will.

Okay.

And that's a concern. Of course there are other problems that can come up. There's always the question of, you know, ideally the person who's the economically superior party is going to want the her, his or her fiance, depending on the economically dependent party, to waive certain rights to alimony, what have you. And you always counsel very strongly against that because you don't know what the future is going to be. Bring children, child issues, child, children from prior marriages. That's really not going to be a problem as a general rule, other than, well, it, you know, the question of adoption rarely comes up, but it depends on the other parent. But you know, children from a first marriage is not so much an issue, except of course in terms of if you have the well to do person who has children from first marriage, divorces and then marries the, you know, the gold digger. And.

And then you.

You said gold digger on our show.

Well, you know, I mean, you sound.

Like Bill Burr now. Okay. All right, we'll go there.

Well, you know, the person. Yeah. The original, the original purpose of a prenup was for that very situation.

Sure.

Because it was against public policy to allow a prenup to require a waiver of alimony in the future.

Okay.

Over the years, in the last, I would say three decades, the. The courts have changed their attitude towards that. So you can waive alimony. But what, what the per. The original purpose of the Alamo of the prenup was so that the second wife waived her rights to the wealthy fiance's estate so as to not interfere with the inheritances or, you know, of the children from the first marriage.

Okay. And certainly the estate planning is impacted by multiple marriages, and we certainly talk about that with estate attorneys and on a regular basis. And also then corporate attorneys who are trying to protect business interests from ever being interrupted by a. A estranged spouse. I mean, you know, it's one thing to say you can. You can receive the economic value of the family stock, and another thing to say you're suddenly in the family business as a. As an estranged spouse. Is there.

I mean, that's more than nuance, don't you think?

Well, going through a divorce, an estranged spouse, if the spouse has no actual shareholder interest in the other spouse's family business, there's. Yeah, there's. There's no way that that spouse can affect any kind of control. You know, the only, the only way a spouse can affect control and the other spouse's family business is through the same documents that anybody has control. You know, give them 51% of the shares or provide for them in a. In a contract, you know, an employment contract of some sort. I want to mention one thing about the estate issue.

Sure.

With the. The couple that, you know, were their children from the prior marriage, and now you have a new couple and they're going to have a child or children. Even if the dependent spouse waives interest in the wealthy spouse's estate, the wealthy spouse can always bind himself. If I can make the general gender reference, bind himself to providing for children of the second marriage through life insurance.

Okay. All right. So. And certainly that's. That's the kind of thing that involves financial advisors, sometimes tax, tax accountants and other folks. So there's. There's only two ways that a marriage can end that I'm aware of. Right.

Somebody either has to die or the marriage has to end by divorce. Not that I'm trying to talk anyone on this, on this show from getting married, but there's only two ways for them to end. It's not like a business partnership or some kind of other friendship where you shake hands and part ways. It's. It's a little different. So planning for the loss of a spouse, Widowhood is something that we get involved with on a regular basis financially. But planning for divorce is not something that financial advisors generally are trained to do in advance, number one. But when clients divorce, it's very common that one spouse will leave their existing financial advisor because he or she feels that that advisor is closer with the other spouse.

And it happens a lot. And, Leon, for some reason, in our business, that doesn't happen. I mean, it's been a bizarre thing, a wonderful thing, that when we have clients who go through this because they do, life happens more often than not. Both spouses say, we'd like to stay with you, and we just have a different advisor work with each of them to create that. But we can't opine in the divorce negotiation if that's the case. It's a. It's a challenging thing. Where do you turn, where do people turn for.

For valuations? Do. Do you handle that? Do you hire a valuation expert? I don't mean necessarily a business valuation, but just an asset valuation. Are you doing that math? Because you said you weren't good at math.

Well, if we're talking about dividing an investment portfolio, probably the best way and the most effective and the most fair way of handling that is to divide it in kind so that you split the account so that each party gets half of each investment product, whether it's a mutual fund or shares of stock or whatever. This way, each portfolio represents the same level of unrealized taxable gains and unrealized taxable losses. So no one's getting a bad deal because of the tax impact. In terms of valuations. I'm not sure what it would be that you would be valuing beyond businesses, which is probably not something that you would deal with directly.

So what I'm thinking is if there are situations where assets are being split, you need to understand. People need to understand that not every dollar is the same. A dollar in an IRA that might go to a quadro or domestic relations order hasn't been taxed yet, whereas a dollar in a brokerage account is going to be subject to a different tax regime. So making sure that both spouses are well informed that A dollar is not always a dollar because sometimes it has a mortgage on it is, I think, a pretty. So that's from a valuation standpoint. How do you deal with the potential net impact of that and particularly if each spouse is likely to be in a very different income tax bracket? Does that matter?

Well, it's hard to generalize because it really depends on the specific product. But when we're dealing with retirement accounts, we're typically dividing them with the use of a, and I'll refer to it generically as a quadro, which is an acronym for qualified domestic relations order. Although, you know, there's a different style of order for an IRA or a federal pension or a state pension or what have you. But they all basically accomplish the same thing, and that is to divide a retirement asset at the time of divorce, which without having any kind of adverse tax impact. Okay, if you, you know, if you took an IRA with, and divided it without the benefit of an IRA transfer order, you would essentially be, it would be like cashing in the IRA with the penalty.

Oh, absolutely.

Tax impact, you wouldn't do that. Likewise, if you're using an, a quadro type instrument to, to equalize or to divide an IRA account, you would probably take into account a diffuse a different quadro for a Roth ira, which is post tax dollars. When you have to start comparing apples and oranges, that becomes a challenge. And I mean, it's even more evident when you were talking about, well, so and so will keep these funds and so and so will keep the other person's half equity in the house. Okay, so how do you measure, as you say, a $1 of equity in a home versus $1 in a bank account?

Right. Well, and if, if, if, you know, one spouse and another are getting divorced and they have $2 million between them, but there's a million dollars in an IRA and a million dollars in a, in a bank account.

Well, that's not a problem. Then you split, you split them over.

But you have to make sure that both spouses understand that it's not like, hey, I'll keep the IRA and you keep the bank account or vice versa, because they are going to be treated so differently on the back end.

But then you have the problem where someone needs cash now and not so much retirement because they're expecting, you know, their parents to pass away and get a decent inheritance. That'll be their retirement. So if they need the cash now, they may not be so excited about that kind of arrangement. So that all, you know, and then you do have the problem of what's a dollar worth compared to a dollar in an IRA account? And for that, you know, we leave the problem to you.

So I think. Yeah, I appreciate that. I think now we know why you're a preeminent lawyer. And it's because the answer to everything is it depends.

Right.

That if you just give that answer.

All the time, it also depends who I'm representing.

You could be a super lawyer immediately just by saying, well, it depends. Let's talk about there's nuance.

All right.

Well, we are almost out of time. I, you know, this was a heavy topic, but I think you brought a lot of. Brought a lot of knowledge and experience to the table. I thank you for that. You're not allowed to get out of this hot seat, though, without asking, without answering the question that every guest on our show has to answer. And I may or may not have prepared you for this. So that's.

You have not.

That's perfect. Perfect. I can't wait. This is going to be fun. So every guest on this show is asked the same thing. So, Leon, I'm going to ask you, what do you want to be when you grow up?

Well, actually, I've. I've struggled with that issue in, you know, contemporaneously. I don't know if this is going.

To be a dodge, but like any great attorney. Yeah.

Okay.

Well, at the end of the day. That is an exact example of someone who has graduated. You graduated into retirement. Retirement being the absence of needing to work, not the absence of work itself. I congratulate you on that and plan to be in those kinds of shoes at some point myself and look forward to it. Leon, thanks for coming on the show. I know this was a departure from your normal day, so thank you for.

Doing first time I've ever done this, but thank you.

No one would have known if you hadn't told them, so thanks for being here. I'd like to thank everyone for listening and watching today. If you enjoy our show, please subscribe Leave a rating on your favorite podcast platform. Share it with your friends and family so they can join you on your journey to financial freedom. If you'd like to send us a topic or idea to discuss in a future episode of Don't Retire Graduate, please post it on our Facebook page or tweet us Rotman Planning we'll be back next week with another entry in our Diary of a Financial Advisor and in two weeks with another engaging guest. For now, this is your host, Eric Brotman, reminding you Don't Retire Graduate.

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